Hertz to buy Dollar Thrifty for $2.3bn
New York, August 27, 2012
Hertz Global Holdings, the No 2 US car rental company, said it will buy smaller rival Dollar Thrifty Automotive Group for about $2.3 billion, ending more than two years of on-off takeover talks.
Hertz and third-ranked Avis Group Inc have made several offers for Dollar Thrifty, but until now they have been blocked by disagreements over price and doubts about regulatory approval.
The takeover leaves just three players with more than 90 per cent of the US car rental market and cements Hertz's position as the number two, leaving Avis far behind in third.
Privately held Enterprise Holdings, with its Alamo, National and Enterprise brands, is far and away the market leader.
Dollar Thrifty, the final big target in an industry that has consolidated rapidly, this month urged Hertz to make a compelling bid or leave it alone.
Hertz will buy Dollar Thrifty for $87.50 per share in cash, a premium of 8 percent over Dollar Thrifty's Friday closing price of $81 on the New York Stock Exchange, and almost double a $1.2 billion offer Hertz made in April 2010.
Several top Dollar Thrifty shareholders told Reuters last week they would accept a takeover offer from Hertz that valued the company at more than $87 per share.
Avis' entry into the bidding in 2010 pushed up the price for Dollar Thrifty, which was at one point during the financial crisis was offered $2 per share by Hertz.
Avis withdrew its offer after it bought Avis Europe last year for about $1 billion.
"Hertz has made a compelling offer to our stockholders that reflects the strength of our business," Dollar Thrifty Chief Executive Scott Thompson said in a statement.
In a bid to win regulatory approval for the deal, Hertz has agreed to sell its budget brand, Advantage, to Franchise Services of North America and Macquarie Capital. That sale is conditional on completing the Dollar Thrifty purchase.
Hertz did not specify the sale price but Bloomberg news, quoting a person familiar with the matter, reported the unit would be sold for $16 million.
Advantage competes directly with Dollar Thrifty in the budget car rental market.
Franchise Services is headed by Sanford Miller, who was once the CEO of Budget Group Inc, which is now a part of Avis.
Hertz said late on Sunday it expects at least $160 million of annual cost savings from the transaction.
Lazard, Barclays, Bank of America Merrill Lynch and Deutsche Bank are financial advisers to Hertz, while J.P. Morgan and Goldman Sachs are advising Dollar Thrifty. – Reuters
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